Find the best decision using the adequate technique

Reference no: EM132673414

BUS 306 Quantitative Business Analysis - Emirates College of Technology

Question 1: Problem solving

A handicraft products trader is selling leather cases for $40 the unit. To run his business, he needs to pay $10000 for rent, $5000 salaries, and another $5000 for marketing campaigns. The handicraft trader has the choice to import his products from different countries, and it will cost him $20 per unit if the product comes from China, $25 per unit if the product comes from India, and $15 per unit if the product comes from Malaysia.

Questions:

1. If the trader must choose to import his products from one country, then which country will it be?
2. compute the trader's profit if he sells 40 units imported from China and 50 units imported from India.
3. compute the trader's profit if he imports only from China and sells 500 then 2000 units. Explain the obtained results.
4. What is the trader total cost from importing 100 units from Malaysia and 200 units from India ?
5. If the trader decides to import only from China, how many units he should sell to reach a profit of $2000?
6. If the trader wants to reach a positive profit in case of selling 900, 110, and 1500 units, then from where he should import his products for each case.

Question 2: Problem solving

Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:

	Outcomes
Alternative Decisions	O₁: Favorable Market	O₂: Moderate Market	O₃: Unfavorable Market
Sub 100	$ 300000	$ 150000	$ -200000
Sub 200	$ 350000	$ 200000	$ 200000
Oil J	$ 250000	$ 100000	$ -100000
Texan	$ 75000	$ 50000	$ 0
Probabilities	0.2	0.5	0.3

For example, if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very pessimistic decision maker.

Questions:

1. What type of decision environment is Ken facing?
2. What decision criterion should he use?
3. What alternative is best?

If information about the probability of each outcome becomes available to Ken then:

Questions:

4. Find the best decision using the adequate technique.
5. How much Ken should pay to know the perfect information about the market condition?
6. Is it reasonable for Ken to purchase the perfect information about the market outcomes for $20,000? Explain why.

Reference no: EM132673414

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